Strategy Participant Guide

Innovation Center
Strategy
Participant Guide
Participant Guide Innovation Center: Strategy
Innovation Center
 Strategy
Management
Process
Harvard Business School Publishing 2008 Page 2

Agenda (60 minutes)
Quick Exercise: How Good Are We at Innovation Strategy?

(5 minutes)
Why Innovation Strategy Is Important (10 minutes)
Tool: Assessing Your Innovation Environment (10 minutes)
Looking for Innovation Opportunities (5 minutes)
Selecting Your Playing Field (5 minutes)
Tool: Disrupt-o-Meter (10 minutes)
Determining Your Success Criteria (3 minutes)
Tool: What Are Your Success Criteria? (2 minutes)
Assessing New Ideas’ Potential (5 minutes)
Choosing the Right Team to Lead the Innovation (5 minutes)
Tips for Innovating New Ways of Doing Business (handout)

Quick Exercise: How Good Are We at

Innovation Strategy? (5 minutes)
First, think about your business unit or department:

In what ways has your unit or department demonstrated strength in
innovation?
How does your unit or department identify ideas for developing

innovative products, services, or ways of doing business?
Do your unit’s or department’s innovation efforts usually generate the

expected outcomes?
Now, think about your own effectiveness at innovation

strategy:
How do you define “innovation”?
What practices do you use, personally, to manage innovation

strategically in your unit or department?
In what respects would you like to strengthen your effectiveness in

innovation strategy?

Why Innovation Strategy Is Important (10 minutes)
Adapted from “Interview with Scott D. Anthony,” “Can You Disrupt and
Sustain at the Same Time?” by Scott D. Anthony and Clayton M. Christensen,
and “Mapping Your Innovation Strategy” by Scott D. Anthony, Matt Eyring,
and Lib Gibson.
There’s a lot of talk about innovation in business today. But what does
“innovating” mean, exactly? It’s not the same as simply inventing a
new gadget. Innovation is an invention that changes the rules of the
game—by making things simpler, cheaper, more convenient, or more
accessible for companies and their customers. An innovation can take
several forms. Think about possible examples:
Innovation can Example

be . . .
Why is innovation so important to companies? Companies that

innovate successfully:
• Bring in more revenue.
• Attract talented managers and employees.
• Create better returns for shareholders.
• Stay ahead of the competition.
These are crucial benefits, but innovation isn’t easy. Turn the page to
find out why.

Why Innovation Strategy Is Important (cont’d)
Innovation isn’t easy, for several reasons:
• There are many ways to go about it. For example, companies must
decide whether to make small changes in their offerings or giant
leaps.
• In trying to innovate, many companies default to growth strategies

that worked in the past (such as designing particular features into a
new product). But in unfamiliar markets, these strategies may
backfire.
• Companies often merely take a product or service that’s already

good and make it better—which doesn’t change the rules of any
game.
To overcome these problems, companies need to develop an

innovation strategy—a game plan for how they’re going to create
transformative products, services, or ways of doing business.
To craft an effective innovation strategy, you take these five steps:
1. Look around you for opportunities to innovate—inside and outside

your company.
2. Select your playing field—the markets where you’ll innovate.
3. Determine your success criteria—the characteristics that have made

previous innovations in your playing field successful.
4. Evaluate your ideas’ potential—the risks involved and the chances

of success or failure.
5. Select the right kind of team to drive the innovation.
We’ll look at each of these steps in detail in the following sections.
The bottom line: Innovation is essential to companies’ survival, but

it’s difficult to do successfully. To reap the benefits of innovating,
companies must formulate a sound innovation strategy.

Tool: Assessing Your Innovation Environment

(10 minutes)
Adapted from The Innovator’s Guide to Growth by Scott D. Anthony, Mark

W. Johnson, Joseph V. Sinfield, and Elizabeth J. Altman. Harvard Business
Press, 2008.
For each of the six items below, select the box that most closely
represents your situation. Add five points for each choice you make in
the left-hand column. Subtract five points for each choice you make in
the right-hand column. When you have completed your scoring, see
the scoring ranges that follow the tool.
More Less
demanding demanding
innovation innovation
environment Neutral environment
Environment (+5 points) (0 points) (-5 points)
External environment
1. Industry Highly mature Market beginning Nascent market
maturity market to with
showing signs of show signs of unclear business
commoditization maturity models
2. Competitive Fast-moving Moderately Slow-moving

dynamics industry changing industry
and/or industry industry (e.g., where change
with short automobiles) rarely
product life occurs (e.g.,
cycles (e.g., steel)
biotech)
3. Asset intensity Very high, with Moderate; Low; innovation

innovation innovation possible with
requiring major possible with less little to no
capital capital investment (e.g.,
equipment (e.g., equipment (e.g., media)
pharmaceutical) consumer goods)


(cont’d)
More Less
demanding demanding
innovation innovation
environment Neutral environment
Environment (+5 points) (0 points) (-5 points)
Internal environment
4. Scope of Innovating Innovating able Innovating
innovation possible only to be possible in
activities with close isolated within a separate pockets
coordination single business of
across business unit with the organization
units, functions, coordination with
and regions across functions minimal
coordination
5. Innovation Company in Innovation Entrepreneurial

culture “operational” understood to be culture, where
mode, with important, but innovation is a
innovation not core part of the
viewed largely as something that is company DNA
a distraction everyone’s
responsibility
6. Breadth of <10 percent of 10–30 percent of >30 percent of

talent key managers key key
capable of managers managers
developing capable of capable of
legitimately developing developing
disruptive ideas legitimately legitimately
disruptive ideas disruptive ideas
Turn the page to assess the implications of your score.


(cont’d)
To assess the implications of your score, see the scoring ranges below:
20 to 30
Very demanding innovation environment: In these settings, there is a
likely need for greater resource allocation, more structured approaches
to innovation, more significant senior management guidance, and
overall organizational autonomy for selected innovation units.
10 to 15
Moderately demanding innovation environment: In these contexts,
circumstances suggest focusing on one or two key aspects of a
company’s environment. Significant hands-on management may be
required to overcome internal challenges, and/or well-defined
structure and process may be needed to foster rapid innovation while
effectively managing potential risks.
–15 to 5
Less demanding innovation environment: Here, focused innovation
efforts can be carried out with limited need for direction from senior
leaders and minimal investment. Market conditions and the personnel
in the organization likely enable a more flexible and slower paced
approach to innovation.
–30 to –20
Naturally innovative environment: Innovation in these settings tends
to be inherent in the core culture. Innovation efforts can thus be well
integrated with the main lines of business and can occur as a natural
part of doing business. In these environments, it is important not to
overdirect or stifle innovation through excessive structure.
© Copyright 2008 Innosight, LLC. All Rights Reserved. http://www.innosight.com/

Adapted from The Innovator’s Guide to Growth by Scott D. Anthony, Mark W.
Johnson, Joseph V. Sinfield, and Elizabeth J. Altman. Harvard Business Press, 2008.

Looking for Innovation Opportunities (5 minutes)
Adapted from “The Discipline of Innovation” by Peter F. Drucker, “Connect

and Develop: Inside Procter & Gamble’s New Model for Innovation” by Larry
Huston and Nabil Sakkab, and “Open-Market Innovation” by Darrell Rigby
and Chris Zook.
The first step in formulating your innovation strategy is to look around

for opportunities. That means examining what’s happening within and
outside your organization. Think of examples of places to look for
innovation opportunities:
Where to Look Examples
The bottom line: Innovation opportunities can crop up anywhere.

Selecting Your Playing Field (5 minutes)

Adapted from “Mapping Your Innovation Strategy” by Scott D. Anthony,
Matt Eyring, and Lib Gibson, “Interview with Scott D. Anthony,” and “Value
Innovation: The Strategic Logic of High Growth” by W. Chan Kim and Renée
Mauborgne.
Your company faces a bewildering array of possible markets for

innovation. To narrow your choice, aim for markets lying somewhat
out of—but not too far from—your core business. The following tactics
can help:
• Look for customers who are using existing products in

unusual ways or using products for things they weren’t
designed to do. For instance, software provider Intuit noticed that
small business owners were using its personal financial software
package because they liked its simplicity. Intuit optimized the
program for these customers, branded it QuickBooks—and quickly
dominated the product category.
• Identify market spaces where competitors haven’t

ventured—and where your company can play to its strengths
to create better forms of value for customers. For example,
Virgin Atlantic cut first-class airline service and channeled cost
savings into greater value for business-class passengers: more
comfortable seats and free transportation to and from airports. It
attracted not only business-class customers but also full-economy-
fare and first-class passengers of other airlines.
• Aim for markets where you can disrupt the playing field by
making things easier, cheaper, more convenient, or more
accessible for consumers. Nintendo’s wildly successful Wii
gaming console doesn’t sport extra-fancy graphics. Rather, it has a
feature that makes it simple to interact with the game. Even people
who have never played video games before can pick it up and
immediately play.
Key point: The most promising playing fields for innovation are
markets where your company can leverage its existing strengths to
create disruption—to make things easier, cheaper, or more convenient
or accessible for customers.

Tool: Disrupt-o-Meter (10 minutes)
Adapted from The Innovator’s Guide to Growth by Scott D. Anthony, Mark

W. Johnson, Joseph V. Sinfield, and Elizabeth J. Altman. Harvard Business
Press, 2008.
Use this tool to determine how disruptive a potential innovation is

likely to be. For each strategic area, give 0 points for each “least
disruptive” answer, 5 points for each answer in the middle, and 10
points for each “most disruptive” answer. See where the total score
places the potential innovation on the “Disrupt-o-Meter” arc.
45
30 60
0 90
Less Disruptive More Disruptive
Least Somewhat Most

disruptive disruptive disruptive
Strategic Area (0 points) (5 points) (10 points)
1. Our first year target is the mass a large a niche
…. market market market
2. The customer thinks the get done get done get done
target job needs to … better cheaper easier
3. The customer will think perfect good good
the offering is … enough
4. The price will be … high medium low
5. The business model is … what we've … with a few radically

always done tweaks different
6. The channel to market 100% at least 50% entirely new
is … existing new channel channel
channel
7. The competitor will I need to do I need to I don't care
think … this watch this
tomorrow carefully
8. 1st-year revenue will huge average small
be …
9. Required investment above average below
over the next 12 months average average
is …

Tool: Disrupt-o-Meter (cont’d)
In the table below, read the rationale for each of the 9 strategic areas.
Then consider the possible strategic opportunities for those areas for
which your innovation scored “not disruptive” or “somewhat
disruptive.”
Strategic
Area Rationale opportunities
1. Our first year Disruptive solutions typically • Focus on smaller
target is …. start in limited foothold markets customer group
before expanding into more • Change to a new
demanding market tiers geography
• Target a new
context
2. The customer The customer should be looking • Address a more
thinks the for improvements along new focused job
target job dimensions such as simplicity
needs to … and convenience
3. The customer The customer should think the • Make solution easier
will think the solution is “good enough” in the to use
offering is … early days • De-feature to lower
cost
4. The price will Although pricing is complicated, • Cut price by 50%
be … generally speaking a disruptive
solution will be relatively
inexpensive compared to
existing solutions
5. The business For an established company, • Add element (e.g.,
model is … disruptive approaches often service)
follow very different business • Drop element
models from the core business
The tool continues on the next page.

Tool: Disrupt-o-Meter (cont’d)
Strategic
Area Rationale opportunities
6. The channel Frequently disruptive • Choose a new
to market approaches utilize distinct channel
is … channels to market from • Go direct to
established products and consumer
services (startups should
answer this and the previous
question from the perspective
of an industry incumbent)
7. The Disruptive solutions take • Reformulate the
competitor advantage of competitive business model
will think … weakness and blind spots • Partner with a
competitor
8. 1st-year Patient for growth, impatient for • Start with a test
revenue will profits implies a slow and market
be … steady start
9. Required Disruptive solutions typically • Cut investment by
investment don’t involve “Buck Rogers” 50%
over the next solutions so require relatively
12 months is below average investment to
… move forward
© Copyright 2008 Innosight, LLC. All Rights Reserved. http://www.innosight.com/

Adapted from The Innovator’s Guide to Growth by Scott D. Anthony, Mark W.
Johnson, Joseph V. Sinfield, and Elizabeth J. Altman. Harvard Business Press, 2008.

Determining Your Success Criteria (3 minutes)
Adapted from “Mapping Your Innovation Strategy” by Scott D. Anthony,

Matt Eyring, and Lib Gibson.
Once you’ve chosen your playing field, analyze major innovations in

your targeted market’s history to identify common elements shared by
successful offerings.
Example: A consumer health care products company had identified

at-home diagnostics as a key growth area and targeted playing field.
By analyzing the history of home diagnostics (pregnancy kits, blood
glucose monitors), it identified numerous characteristics shared by
successful innovations. These included:
• Diagnosing the condition was currently difficult, inconvenient, or

expensive.
• The results were conclusive without requiring further testing.
• Competitors had difficulty duplicating the product.
In the table on the next page, write down your selected playing field.
In the left-hand column, list innovations that have scored successes in
that playing field. In the right-hand column, list all the characteristics
shared by those successful innovations.

Tool: What Are Your Success Criteria? (2 minutes)
Use this tool to identify your selected playing field and then record
your insights into the characteristics shared by successful innovations
in this same playing field.
Your selected playing field:

Previously Shared Characteristics
Successful
Innovations

Assessing New Ideas’ Potential (5 minutes)
Adapted from “Is It Real? Can We Win? Is It Worth Doing? Managing Risk
and Reward in an Innovation Portfolio” by George S. Day.
To assess new ideas’ potential, evaluate them against the success

criteria you’ve defined. Also assess their risk—by subjecting them to
the “R-W-W” test: Is it real (does a market exist for it)? Can your
company win (will the offering be competitive)? And is the innovation
worth doing (will it be profitable and make strategic sense)? Consider
how you might determine answers to these questions:
Is It Real?
A market exists for the innovation if: The product is real if:
Can We Win?
The product will be competitive if: Your company will be competitive if:
Is It Worth Doing?
The innovation will be profitable at an The innovation makes strategic sense
acceptable risk if: if:

Choosing the Right Team to Lead the

Innovation (5 minutes)
Adapted from “Meeting the Challenge of Disruptive Change” by Clayton M.
Christensen and Michael Overdorf.
Congratulations! Your potential innovation meets your success criteria

and passes the R-W-W (Real, Win, Worth It) test. You can boost its
chances of success even further by selecting the right kind of team to
move the project forward. There are several kinds of teams, and they
may operate within your company or separately from it.
How to pick the right kind of team and make the right choice about
where it should operate? Ask yourself two questions:
• “How well does the innovation fit with our company’s values?” (For
example, if your innovation team can tolerate lower profit margins
than your established company demands, the value fit is poor.)
• “How well does the innovation fit with our company’s processes?”
(Processes include decision-making protocols and project
coordination patterns.)
Now use the table on the next page to choose the right team for your
innovation.

Choosing the Right Team to Lead the

Innovation (cont’d)
If your Select this type of To operate … Because …

innovation … team …
Fits well with Functional teams who Within your Owing to the good fit
your existing work sequentially on existing with existing
values and issues, or lightweight organization processes and values,
processes teams—ad hoc cross- no new capabilities or
functional teams who organizational
work simultaneously on structures are called
multiple issues for.
Fits well with Heavyweight team Within your The poor fit with
existing dedicated exclusively to existing existing processes
values but the innovation project, organization requires new types of
poorly with with complete coordination among
existing responsibility for its groups and
processes success individuals.
Fits poorly Heavyweight team Within your In-house development
with existing dedicated exclusively to existing capitalizes on existing
values but the innovation project, organization for processes. A spin-off
well with with complete development; for the
existing responsibility for its followed by a commercialization
processes success spin-off for phase facilitates new
commercializa- values—such as a
tion different cost structure
with lower profit
margins.
Fits poorly Heavyweight team In a separate A spin-off enables the
with your dedicated exclusively to spin-off or project to be governed
existing the innovation project, acquired by different values and
values and with complete organization ensures that new
processes responsibility for its processes emerge.
success
Key point: By selecting the right kind of team for your innovation and
making the right choice about where it will operate, you heighten your
chances of innovating successfully.

Tips for Innovating New Ways of Doing

Business (handout)
Adapted from “The Why, What, and How of Management Innovation” by
Gary Hamel.
Like innovative products and services, breakthroughs in how your

company does business can deliver potent competitive advantages.
The following practices can help you identify innovations in business
processes and models.
Identify a Meaty Problem
• Ask what tough trade-offs your company never gets right.
Example: Does obsessive pursuit of short-term earnings

undermine your willingness to invest in new ideas? Is your
organization growing less agile while pursuing size and scale
advantages? What other “either/or’s” can you turn into
“both/and’s”?
• Ask what your organization is bad at.
Example: Does your company have trouble changing before it’s

forced to? Unleashing front-line employees’ imaginations? Imagine
a “can’t do” you can turn into a “can do.”
• Ask what challenges the future will hold for you.
Example: What are the ramifications of escalating consumer

power? Near-instant commoditization of products?
Challenge Your Management Assumptions
• Ask what shared beliefs may be inhibiting your company’s ability to

tackle the meaty problem you’ve identified.
Example: Do shared beliefs include “Change must start at the

top”? If so, such beliefs may be inhibiting employees from offering
fresh ideas about how to do things more efficiently or effectively.
Such beliefs may also be making it difficult for employees to get
support for their ideas.

Tips for Innovating New Ways of Doing

Business (cont’d)
Exploit the Power of Analogy
• Identify a decidedly unconventional organization and ask what

practices it applies that might help you solve the meaty problem
you’ve identified.
Example: If you seek ideas for funding ordinary employees’

glimmer-in-the-eye innovations, study Bangladesh’s Grameen
Bank. It makes micro-loans to poor people with no collateral
requirement and little paperwork. Borrowers—which by 2004
numbered more than 4 million—use the funds to start small
businesses that benefit themselves and their communities.
Ask: “How can we make it equally easy for our employees to get
the capital and other support they need to bring a promising new
idea to fruition?”

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Innovation Center

Harvard Business School Publishing 2008 Page 2

Agenda (60 minutes)

Quick Exercise: How Good Are We at Innovation Strategy?

Why Innovation Strategy Is Important (10 minutes)

Tool: Assessing Your Innovation Environment (10 minutes)

Looking for Innovation Opportunities (5 minutes)

Selecting Your Playing Field (5 minutes)

Tool: Disrupt-o-Meter (10 minutes)

Determining Your Success Criteria (3 minutes)

Tool: What Are Your Success Criteria? (2 minutes)

Assessing New Ideas’ Potential (5 minutes)

Choosing the Right Team to Lead the Innovation (5 minutes)

Tips for Innovating New Ways of Doing Business (handout)

Harvard Business School Publishing 2008 Page 3

Quick Exercise: How Good Are We at

First, think about your business unit or department:

How does your unit or department identify ideas for developing

Do your unit’s or department’s innovation efforts usually generate the

Now, think about your own effectiveness at innovation

What practices do you use, personally, to manage innovation

In what respects would you like to strengthen your effectiveness in

Harvard Business School Publishing 2008 Page 4

Why Innovation Strategy Is Important (10 minutes)

Innovation can Example

Why is innovation so important to companies? Companies that

• Bring in more revenue.

• Attract talented managers and employees.

• Create better returns for shareholders.

• Stay ahead of the competition.

Harvard Business School Publishing 2008 Page 5

Why Innovation Strategy Is Important (cont’d)

Innovation isn’t easy, for several reasons:

• In trying to innovate, many companies default to growth strategies

• Companies often merely take a product or service that’s already

To overcome these problems, companies need to develop an

To craft an effective innovation strategy, you take these five steps:

1. Look around you for opportunities to innovate—inside and outside

2. Select your playing field—the markets where you’ll innovate.

3. Determine your success criteria—the characteristics that have made

4. Evaluate your ideas’ potential—the risks involved and the chances

5. Select the right kind of team to drive the innovation.

We’ll look at each of these steps in detail in the following sections.

The bottom line: Innovation is essential to companies’ survival, but

Harvard Business School Publishing 2008 Page 6

Tool: Assessing Your Innovation Environment

Adapted from The Innovator’s Guide to Growth by Scott D. Anthony, Mark

2. Competitive Fast-moving Moderately Slow-moving

3. Asset intensity Very high, with Moderate; Low; innovation

Harvard Business School Publishing 2008 Page 7

Tool: Assessing Your Innovation Environment

5. Innovation Company in Innovation Entrepreneurial

6. Breadth of <10 percent of 10–30 percent of >30 percent of

Turn the page to assess the implications of your score.

Harvard Business School Publishing 2008 Page 8

Tool: Assessing Your Innovation Environment

© Copyright 2008 Innosight, LLC. All Rights Reserved. http://www.innosight.com/

Harvard Business School Publishing 2008 Page 9

Looking for Innovation Opportunities (5 minutes)

Adapted from “The Discipline of Innovation” by Peter F. Drucker, “Connect

The first step in formulating your innovation strategy is to look around

Where to Look Examples

The bottom line: Innovation opportunities can crop up anywhere.